Angie Dobney

Understanding Guest Value: Revenue Management Strategies Every Casino Needs To Know

Guest valuation is the method used to determine the spending potential of each customer as well as the costs associated with attracting and retaining him or her. In a nutshell, a guest valuation methodology leverages historical spending behavior and trends along with costs to forecast expected profit.

Guest valuation is an important component of revenue management for any property, and particularly for casino hotels. Ever-increasing pressure from the competition combined with rapidly evolving shifts in the demographic profile of guests makes it critical for gaming properties to identify their most profitable customers and to understand their buying behaviors and spending patterns at all stages of the stay.

Following are key revenue management strategies every casino management team needs to know to ensure they understand guest value and identify the customers who have the biggest impact on the bottom line.

Consider the Big Picture

Casinos do a great job of tracking information about players. The challenge is tracking information about guests.

Savvy casino properties take a ‘big picture’ approach to guest value that considers all available revenue streams – both gaming and non-gaming — such as food and beverage, entertainment, wellness and retail. After all, guests are spending money in these areas. Take into account shopping behaviors, as over time a pattern of guest spend across the property will emerge. This will help to provide an overall value for that customer. Make sure your metrics are based on total guest value and total profit, with every department working toward a common goal.

Another thing to keep in mind is that although the ADR can represent the buying power of a guest, it can be misleading. For example, a couple may book a week in one of the hotel’s most expensive suites yet spend almost nothing on ancillary services and never visit the property again, while a person traveling on business may stay only two nights in a standard room but spend money in the casino, the restaurant and the gift shop, and visit the hotel several times a year. In this case, basing guest value on ADR alone would be a mistake, as the business traveler is more valuable due to her ancillary spending.

Share the Data

In most casino hotels, a wealth of information is generated from every operating department, including restaurants, banquet spaces, golf courses, spas and nightclubs. The challenge for many properties is making this information accessible. If it isn’t available to multiple departments, the property will miss opportunities to personalize offers and increase profitability.

Although the concept of collaboration isn’t new, it’s so vital to growth that it bears repeating. Experienced hoteliers understand that when departments work in silos, the entire property suffers. In short, it takes teamwork to identify your most valuable guests.

It’s particularly important for the hotel’s marketing and revenue management teams to share information and data. Marketing’s mission is to attract the right guest at the right time, which is determined by revenue management. When these teams collaborate, they can move quickly to leverage optimal conditions or drive change in a segment’s forecasted performance.

Likewise, it’s important for the hotel’s software systems to be integrated so that data from one system is shared with others and each team is viewing the same information. This leads to a deeper understanding of guests and allows the property to more effectively price rooms and target promotions.

Leverage Revenue Management Technology

The best way to ensure that you’re identifying your most valuable guests is to implement a state-of-the-art integrated revenue management system that is science-based, flexible and dynamic. The right revenue management technology not only will give you a big-picture view of your guests’ spending habits, but also can help your property realize profit increases of five to 10 percent on both room and ancillary revenue.

Your revenue management solution should have deep integrations with other solutions such as your property management and player tracking systems so you can pull real-time booking data, view player information and get a 360-degree view of your guests. The system also should be able to calculate the value from all the property’s profit centers and predict the value of the guest’s next visit.

Machine Learning (ML) – the ability for a model to automatically adjust and improve its performance based on patterns it recognizes in large amounts of data – has emerged as a popular technique of modern revenue management. In fact, next-generation revenue management systems can support extensive data collection and use ML to mine information and refine algorithms to get the best results.

Artificial Intelligence (AI) builds on the predictive analytics of ML and moves into prescriptive analytics, which provides solutions and recommendations. AI is a proactive approach to data modeling that can critically assess and even generalize the feedback generated by ML.

State-of-the-art revenue management systems based on science rather than rules take advantage of AI by automatically collecting customer-level data, performing ML-based optimization algorithms and distributing inventory through the appropriate channels. And modern booking processes consider the disparate data points throughout a guest’s lifespan to provide a picture of total guest value.

The right revenue management technology not only will give you a big-picture view of your guests’ spending habits but can help your property realize profit increases of five to ten percent on both room and ancillary revenue.

Implement a ‘Total Guest Value’ Culture

Your revenue management strategy should be built upon a foundation of revenue goals using relevant metrics for tracking success as well as a timeline with key milestones. It also should incorporate revenue streams from across all parts of the property as well as the revenue drivers – from the sales department to the online distribution channels.

Aligning everything you do in every area of the hotel and casino toward your revenue and profit goals allows you to have a ‘total guest value’ culture throughout the property. It also ensures that the right people get the right information at the right time.

The strategy should be as specific as possible. For example, it should specify how the property approaches pricing – whether it is dynamically pricing the best available rate based on forecasted demand or actual demand. Done correctly, the strategy will create alignment among employees regarding the role of revenue management in identifying the most valuable guests.

Evaluate Your Strategy Periodically

Don’t take a ‘set it and forget it’ approach to guest valuation. Even the best strategy should be assessed from time to time. As market conditions fluctuate and consumer demands change, so may your customers and their profitability.

Review your booking process regularly. This will tell you if the channels through which guests make reservations are shifting. It also will alert you to trends in guest demographics.

No business remains static, and the gaming industry, in particular, is dynamic and ever-changing. Properties that adjust will thrive, while those that don’t could struggle to remain relevant.

Evaluate Your Strategy Periodically

Don’t take a ‘set it and forget it’ approach to guest valuation. Even the best strategy should be assessed from time to time. As market conditions fluctuate and consumer demands change, so may your customers and their profitability.

Review your booking process regularly. This will tell you if the channels through which guests make reservations are shifting. It also will alert you to trends in guest demographics.

No business remains static, and the gaming industry, in particular, is dynamic and ever-changing. Properties that adjust will thrive, while those that don’t could struggle to remain relevant.

Conclusion

It takes the right technology, teamwork and a culture of total guest value to achieve success. Hotels that fail to embrace the ‘total guest value’ culture will fall behind their competitors, while those that heed these revenue management strategies will thrive.

At the end of the day, the more you know about your guests and their value, the better you can maximize your profitability. Understanding total guest value and its relationship to revenue management will assist you in leveraging optimal conditions, developing effective marketing strategies and encouraging brand loyalty.

Angie Dobney is the vice president of Gaming & Casino Sales at The Rainmaker Group. An industry veteran with more than two decades of experience in revenue management and hospitality operations, she provides hands-on optimization of total resort profit to Rainmaker’s industry-leading gaming and hospitality clients. A recognized expert in total asset and portfolio optimization, and as enthusiastic as she is knowledgeable, Dobney is frequently tapped to speak at conferences around the globe. She is a guest lecturer on hotel and hospitality asset and revenue management at the University of Nevada, Las Vegas, her alma mater, where she was named Mentor of the Year in 2007. She continues to seek out opportunities to get involved in other university pro-grams in her quest to inspire and motivate the next generation of revenue managers. Contact Angie.